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1986 May 22 Th
Margaret Thatcher

Speech to Confederation of British Industry Annual Dinner

Document type:public statement
Document kind:Speech
Venue:Hilton Hotel, central London
Source:Thatcher Archive: speaking text
Editorial comments:Dinner was at 1930 for 2000.
Importance ranking:Major
Word count:2181
Themes:Executive, Conservatism, Employment, Industry, Monetary policy, Privatised and state industries, Energy, Pay, Public spending and borrowing, Taxation, Trade

[Sir James Cleminson] Mr. President, My Lords, Ladies, and Gentlemen.

You may have seen recently the odd reference to a Cabinet reshuffle.

I see you are having one of your own.

You, Mr. President, are standing down after two distinguished years as President of the Confederation.

As Chairman of one of our major companies[fo 1] you have brought great knowledge and experience to your task.

You have been a wise counsellor, always practical, constructive and forward looking.

Sometimes your efforts have been aimed at Government policies, but always with such charm and courtesy that they could never be resented, however penetrating and persistent they might be.[fo 2]

Your services will, fortunately, not be lost to industry, because you are to become Chairman of the British Overseas Trade Board.

You will indeed be a fine ambassador for all that is best in British business.

We thank you James and wish you well, as we do your successor, David Nickson.

But the CBI is also losing, later this year, Sir[fo 3] Terence Beckett, Director-General since 1980.

He has worked tirelessly for six years to keep in constant touch with your members' views, and this has given great weight to his representations to us in Government. The toughness and directness which took him to the top of Ford in Britain have been greatly valued both within the CBI and outside it.[fo 4]

He has been a most effective spokesman and advocate for British industry, and we shall all miss him.

But I am glad we shall see him many times before he moves on later this year.

Government and Industry

Mr. President, Government and CBI do not always[fo 5] agree.

We have our differences and we have our disagreements.

But I would not have it otherwise.

In your companies you define responsibilities and targets and ask your staff to work to them.

It is just as important to have a clear definition of the respective roles of Government and industry—the things[fo 6] which only Governments can do, and the things which only industry can do.

Success depends on people rising to their own responsibilities.

There must be no "they should be doing something about it", whoever "they" are,—and whatever "it" is.

Adopt that kind of approach and nothing will succeed.[fo 7]

The role of Government

From the day we took office this Government set out to create a climate in which business and enterprise could flourish, not only the companies but the men and women working in them.

We have stuck to that objective through thick and thin.[fo 8]

And we will continue to do so.

We had to create a sound financial framework which would endure and a structure of taxation which would promote enterprise.

And we have.

It is because the financial framework is sound that we have been able to ride out[fo 9]— the Falklands War

— a year long miners' strike

— a dramatic fall in the oil price which is more than halving the Government's oil revenues.

All this without financial crisis and without the string of mini-budgets which by 1979 had almost become a way of life.[fo 10]

Had we listened to the big spenders at the beginning of those years and borrowed far more than we did, we should not have ridden these storms.

And what's more, unemployment would have been even worse than it is.

We called the framework a medium term financial strategy.

Some commentators poked fun.[fo 11]

But now everyone wants one.

So much so that sound financial policies, within a medium term framework, needed no discussion at the recent Summit in Tokyo. They provided the unquestioned starting point.

That framework, or discipline if you prefer it, is why, against many people's expectations, we have been able to bring inflation down[fo 12] to 3 per cent, a rate not seen for 18 years.

I am glad to say that interest rates have also come down this year, by two per cent since the Budget.

That framework is why we have been able to do away with a whole panoply of controls.

Exchange controls.[fo 13]

Dividend controls.

Credit controls.

Price controls.

Only seven years ago people had come to think that price controls were the only way to put the lid on inflation, such was the extent to which they had been brainwashed by the dogmas of the day.

That framework is why we have been able to reduce[fo 14] income tax on all levels of income,

— by raising the personal allowances

— by reducing the basic rate and

— by reducing the top rate of tax from 98 per cent to 60 per cent.

And why are we doing it?

First and foremost because we think it is right.[fo 15]

It's only too easy for Governments to spend taxpayers' money so generously that taxpayers are left with too little to be generous to their own families.

And second, who do you think people work best for, the Government or their families?

I have no doubt about the answer.

So we aim to go on reducing income tax.[fo 16]

And we have reformed the structure of company tax so that you can be free to take your decisions, not through the distorting mirror of tax reliefs but on commercial merit.

We now have the lowest rate of corporation tax of any major industrial country.

And for all this I want to pay tribute to my two colleagues who have done most to bring[fo 17] about that success— Geoffrey Howe and Nigel Lawson.

Geoffrey began the demountainisation of taxes. (His word, and not one which appears even in the new four volume supplement of the Oxford English Dictionary.

"Cutting" taxes is good enough for me.)

And Nigel Lawson, who has shown us that there is at[fo 18] least one journalist prepared to tell the difference between M0 and M3.

But more than that, Nigel has abolished four taxes: Investment Income Surcharge, Development Land Tax, the Lifetime Gifts Tax, and—dear to your hearts—the National Insurance Surcharge.

But the framework for prosperity goes beyond finance.

— Our reform of trades union law has enabled you to transform industrial relations.

At long last you as managers once again have the right to manage.

— We have cut red tape.

But—as you Mr. President so often urge—there is more to be done, and David Young has published further proposals today.[fo 19]

—And our measures to support small businesses, so important for new jobs, now match the best in the world.

(I may say, Mr. President that one of the things I like about the CBI is the way it too backs the small man.)

All these are the tasks of Government.

They are all aimed at creating the best climate for enterprise.[fo 20]

Carrying them out has required, and sticking to them will require, strong government.

The role of business

But you know and we know that prosperity is only realised when the wealth creators take advantage of the opportunities.[fo 21]

The past 5 years have begun to show what you can really do.

Since I first addressed you as Prime Minister in 1981:

— output as a whole is up by 13 per cent.

— exports are up by 20 per cent.

— investment is up by 20 per cent.

— manufacturing productivity has risen by[fo 22] 24 per cent.

— and profits have soared by £30 billion.

I am not surprised by these achievements.

After all, if we can sell Newcastle Brown to Japan, Bob Geldof can have us running round Hyde Park, and if Wimbledon can make it to the First Division, there is surely no achievement beyond our reach.[fo 23]

But, Mr. President, this is a splendid record, and I congratulate you all, both in the public and the private sectors.

I particularly congratulate the managers of the businesses which we have returned to their rightful place in the private sector—Jaguar.

The National Freight Consortium.[fo 24]

British Telecom.

British Aerospace.

Cable and Wireless.

To name but a few.

They have risen to the challenge.

And in the process of privatisation, we have vastly increased share ownership, something which is so much in keeping with our belief in a property-owning democracy.[fo 25]

For the way capitalism works and will endure is by bringing to the many what used to be the preserve of the few.

The fact is that industry and commerce have responded to the new climate.

But inevitably one consequence of that response has been that yesterday's overmanning has become today's unemployment.[fo 26]

That process, coupled with the consequences of technological change, continues to bring redundancies, with all the anguish they cause, as we have seen recently in the coal, railway and shipbuilding industries.

The fact that these decisions have to be taken is no comfort to those who bear the consequences.

I would like to thank both the management[fo 27] of those nationalised industries and private sector companies here tonight who have helped through the creation of enterprise companies and in other ways to bring new jobs and new hope to the areas where the need is greatest.

For example NCB Enterprise since last year has created 6400 jobs; every £1 it has invested has brought in £5 from the private sector.[fo 28]

The Prospects

You will want to know how I see the prospects.

Our ability to foresee the future is governed by the speed and scale of change.

And we have seen three dramatic changes in the world's markets.[fo 29]

Commodity prices have fallen sharply.

The price of oil, the most important commodity of all, has halved within six months.

And we have seen a major realignment of international currencies.

Since the Plaza Agreement of last September between the world's five major industrialised countries the Yen has risen[fo 30] against the Dollar by around 40 per cent and the Deutschmark has risen by about 25 per cent.

Sterling has risen by 10 per cent against the Dollar and has fallen by rather more against the Deutschmark.

Changes of this speed and scale will have major but varied effects on nations, on businesses, and on individuals.[fo 31]

The fall of oil prices will transfer about $100 billion of purchasing power from oil producing nations to oil consuming nations.

Lower commodity prices will adversely affect the purchasing power of some developing countries, but will help the industrialised nations.

The dramatic increase in the value of the yen should ease the pressure of Japanese[fo 32] competition.

In the last six months or so the industrial production of our major trading partners has not in general grown as fast as they had expected.

The same thing has happened here.

That is probably associated in part at least with the inevitable period of adjustment to the changes I have outlined.[fo 33]

Nevertheless I am sure those changes will in the coming months help the world economy and the United Kingdom.

How much we gain will depend on what we make of the opportunities now opening up.

And the world of course is becoming more and more competitive.[fo 34]

Inflation, pay and costs

Overall, our exchange rate has fallen.

But that is no long term solution to competitive pressures.

Inflation is down to 3 per cent and that is a major achievement.

But, as you pointed out Mr. President, in Germany and Japan prices are not rising at[fo 35] all, and our costs are rising far faster than theirs.

If that goes on it will inevitably end in lost jobs—the very last thing we all want.

Of course every employer wants to reward the efforts and loyalty of his staff.

But equally every manager and employee should know that their company has to[fo 36] compete successfully to survive and to prosper.

I was therefore very glad to hear you say Mr. President that members of the CBI have a responsibility to ensure that competitiveness is not eroded by increased labour costs and that you have just started a further series of meetings with companies on how to tackle this problem.[fo 37]

A great deal depends on the outcome.

New jobs

The last seven years have been a time for doing today what had been put off from yesterday—and from years of yesterdays.

A time for grasping nettles.

It has been a time for putting things to rights.[fo 38]

Many companies have rightly concentrated on cutting out the loss-makers and putting their resources into profit making activities.

All that has been good.

Rationalisation in industry after industry was long overdue.

In many, though not all, it is virtually complete.[fo 39]

But rationalisation, though necessary, is not enough to give hope to the unemployed, not enough for future success.

For frequently it means producing more goods with fewer people.

But the efficiency it brings should be the prelude to further expansion.

Only new enterprise will create the new jobs.[fo 40]

We need to attack with renewed purpose and vigour the markets of the world.

Your are the people to do it.

And you are succeeding.

New jobs are coming—nearly a million in the last three years—reflecting our sustained recovery.

There are not enough yet.

But we are heading in the right direction.[fo 41]

What is more, we now have a new confidence in our own ability, born of the last seven years. A confidence recognised not only at home, but overseas as well.

We in Britain are beginning to show what we can do.

Let us make this, Industry Year, the year of new enterprise that will bring new opportunities.[fo 42]

It all depends on us, business and Government together.

You do your bit, and we'll do ours.